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How Would You Fix Social Security, Senator Kerry?

When it comes to Social Security reform, John Kerry
is clear about what he is against. “I will not privatize Social
Security,” he declared in his acceptance speech to the Democratic
National Convention. “I will not cut benefits.”

The Democratic Party as a whole takes the same position through
its party platform: “Democrats believe in the progressive,
guaranteed benefit that has ensured that seniors and people with
disabilities receive a benefit not subject to the whims of the
market or the economy. We oppose privatizing Social Security or
raising the retirement age.”

It is a clear, resounding message…that says absolutely nothing
about what Sen. Kerry or the Democrats would do to solve Social
Security’s looming financial crisis.

Yet Social Security will start running a deficit — spending
more money on benefits than it takes in through taxes — in less
than 15 years, by 2018, according to the last report of Social
Security’s trustees. The so-called Social Security Trust Fund,
which is supposed to help pay benefits until 2042, in reality
contains only government bonds, essentially an IOU. While few
people doubt that those benefits will ultimately be paid, the
federal government will still have to find the money to pay
them.

And a lot of money it is. In 2018, the first year that Social
Security faces a shortfall, the cash deficit will exceed $17
billion. That’s almost as much as Kerry has proposed in increased
spending on Pell Grants. By 2022, the annual Social Security
deficit will have grown to roughly $100 billion, as much as Kerry
would spend for a proposed energy trust, increased veterans
benefits, fully funding Head Start, and increased spending on
homeland security. By 2027, with the annual deficit approaching
$200 billion, you can add in the his proposed increases in aid to
state and local governments, his national service plan, and science
and technology research. And so it goes.

Overall, Social Security now faces unfunded liabilities in
excess of $26 trillion. One has to wonder where Kerry plans to get
the money.

Actually, it is all too clear where the money will come from. As
former President Bill Clinton pointed out, there are really only
three options for Social Security reform: raise taxes, cut
benefits, or invest privately. Since Sen. Kerry rules out private
investment or benefit cuts, he could legitimately be accused of
implicitly endorsing tax increases.

And mighty big tax increases they would have to be: a 50 percent
increase in the payroll tax or the equivalent. This would be a tax
hike far higher than what Kerry would “save” by rolling back parts
of President Bush’s tax cuts — even if he hadn’t already promised
to use those savings to fund other government spending.

Not that financing is the only problem with Social Security. The
program already provides today’s workers with a low, below-market
return on their tax “contributions” to the program. The program
unfairly penalizes African-Americans, working women and others.
Workers don’t own their money or have any guaranteed right to their
benefits. In short, it is a program crying out for reform.

But Sen. Kerry continues to duck the issue.

Frankly, that’s not good enough. No one should be running for
president if he can’t stand up and tell the American people what he
would honestly try to do about Social Security. President Bush has
made his position clear. He would allow younger workers to
privately invest at least a portion of their Social Security taxes
through individual accounts. You can agree or disagree with that
idea, but at least you know where he stands.

If Sen. Kerry plans to raise taxes to prop up Social Security,
he should tell us. If he has another idea, he should share it with
us. If he believes that the current program, with all its problems,
is the best we can do, he should say so.

Sen. Kerry says that he has “reported for duty.” But on one of
the most important domestic issues facing this country, he has been
AWOL.